Save Article

Margin Debt Declined 12%
In March as Stock Prices Fell

NEW YORK -- Investors continued to shy away from buying stocks with borrowed funds in March, prolonging a recent trend that has seen margin-debt levels decline in the wake of falling stock prices.

Online Brokers See Profit Cuts as Margin Borrowing Declines

The boom in technology stocks fueled a big increase in margin debt as speculative investors took out loans from their brokers to load up on stocks. But the bubble burst just as margin debt hit a high of $278.53 billion in March 2000, and stocks have come down sharply since then.

That has also been the case with margin debt. Without the bull market's support, margin debt owed by customers of New York Stock Exchange-member firms has been sliced by nearly 41% over the last year. Margin debt fell to $165.35 billion in March, a drop of 12% from $186.81 billion in February.

At the end of March, margin debt made up 1.18% of stock-market capitalization, down from 1.22% in February, said Charles Biderman, president of TrimTabs.com, a Santa Rosa, Calif., firm that tracks stock-market liquidity. Mr. Biderman said he took the decrease in margin debt as a healthy sign for the stock market.

March's drop in margin debt came as stock prices fell. The Dow Jones Industrial Average dropped 5.9% and the Nasdaq Composite Index tumbled 14.5% in the month.